PN 47/04: Ofwat publishes final price limits for water companies in Wales

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PN 47/04	2 December 2004
Ofwat publishes final price limits for water companies in Wales

Ofwat today published final price limits for Dwr Cymru, Severn Trent Water and Dee Valley Water for the five years from 1 April 2005.

Effect on customers' bills

Customers' bills will be as high as they need to be to enable the water companies to carry out their functions, but no higher.
Average household water and sewerage bills for Dwr Cymru customers up by £65 to £352 by 2009-10, before inflation. This compares with the company's proposal for an increase of £76 over the period and Ofwat's draft increase of £51.
Initial increase of £37 in Dwr Cymru's bills in April 2005 to reflect build-up of company costs.
Severn Trent customers will see their bills increase by an average of £43 to £265 by 2009-10, before inflation.
For Dee Valley Water, which provides water services only, there will be a small average reduction, before inflation, of £1 over the five years.

Benefits
The price increases will enable Dwr Cymru to invest more than £1.1 billion to:

Safeguard all essential services – this requires a bigger programme to maintain pipes, sewers and treatment works.
Ensure customers receive safer, more reliable drinking water, e.g. renovation and cleaning of more than 6,500km of water distribution mains to improve drinking water for customers in the region.
Provide further protection for the environment – achieved through a major investment programme to improve rivers and coastal waters, e.g. work at Five Fords sewage treatment works, Wrexham, to reduce the level of ammonia discharged to the River Dee, at Llandrindod Wells to reduce phosphorous levels in the River Ithon and at Garnswllt treatment works to reduce the level of nitrogen entering the River Loughor. These schemes will help to provide a healthier environment for fish.
Resolve or alleviate internal flooding from overloaded sewers for all high risk properties identified in the company's plan.

Philip Fletcher, Director General of Water Services, said:

"I recognise that these price increases will be unwelcome to customers in Wales, especially those on low incomes. However, having scrutinised all of the companies' costs and the future demands on the company, I am convinced the increases are no higher than is necessary.

"We have considered carefully the comments made by customers, the companies, environmental groups and others, and we have taken into account guidance from the Welsh Assembly Government following our draft price limits announced in August.

"To protect the progress that companies in Wales have already made to customers' services and the environment, and to enable them to deliver further improvements, bills will need to rise.

"Although the increases for Dwr Cymru are higher than our draft decisions, they are still lower than the company asked for. We have challenged the companies' costs to ensure customers continue to receive value for money from their water and sewerage services. This means that by 2009 customers of Dwr Cymru will be paying on average only 5% more, before inflation, than they were in 1999.

"The increases mean the companies will be able to invest more in pipes, sewers and treatment works in order to safeguard supplies for the future. They will also be able to continue to play their part in protecting the environment on a long-term, sustainable basis. The benefits they will deliver include the water quality and environmental improvements that the Welsh Assembly Government wanted.

"We have listened to customers, WaterVoice and the companies who wanted to see more investment to deal with the scourge of sewer flooding. These increases mean Dwr Cymru and Severn Trent will be able to resolve or alleviate, by 2010, all known high risk problems identified in their plans where overloaded sewers cause flooding inside properties. They will also be able to make further progress in dealing with external sewer flooding."

Notes to Editors:
1. The Director General of Water Services is the economic regulator of the water and sewerage companies in England and Wales. He exercises his powers in a way that he judges will allow them to carry out their functions properly, and finance them.
2. The final determinations document, 'Future water and sewerage charges 2005-10' - Final determinations', will be available from the Ofwat library on 0121 625 1373 and on the website at www.ofwat.gov.uk
3. The figures quoted in all the attached tables are before inflation. Average household bills in both tables are presented in 2004-05 prices.
4. The price limits for Dwr Cymru represent the maximum the company could charge on its current rebated bills.
5. Although this marks the end of the periodic review, companies will have until 1 February 2005 to ask the Director General to refer the price limits he has set to the Competition Commission for redetermination.

Media enquiries to Ofwat Press Office on : 0121 625 1416/1496/1442. Out of hours enquiries to pager: 08700 555 500 water 503/509.

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